Britain relies on London, and with £650bn of new investment over the next 15 years, the capital will be stronger than ever. Can George Osborne’s northern powerhouse set Britain straight? John Arlidge travels the length of the country to find out. Illustrations by Christian Montenegro
Captain Karen Atherton dips the nose of her Airbus A318 jet and British Airways flight 004 from New York bumps its way down through the morning clouds towards Docklands. There never used to be much to see on the final approach to London City Airport. Heathrow it wasn’t. But look out of the window today and you can make out the future of the capital.
To the left, past the new Olympic Village, there’s Stratford Crossrail station, where trains to Paddington will soon plunge into the world’s longest high-speed commuter tunnel. To the right, 20 new skyscrapers are rising at Canary Wharf. Ahead, over the Emirates Air Line cable car, 25,000 homes are being built on Greenwich Peninsula and around the Royal Docks.
Peer back over the twisted trapezoid extension to Tate Modern and you can make out the chimneys at Battersea Power Station, which are being rebuilt as part of a £15bn redevelopment. Further west lie the remains of the demolished Earls Court exhibition centre, the first stage of a £10bn reconstruction of the area. Everywhere you look, cranes pinpoint new developments like giant tacks in a real-life A-Z map.
London is rebuilding itself. It’s not just an impression from 10,000ft. It’s a fact. The property consultancy Arcadis has analysed planning consents, public and private investment plans, and housing and jobs growth from now until 2030. Its research shows that more than £620bn will be invested in the capital in the next 15 years.
“If London’s economy continues to grow at its long-term rate of about 5% a year, that figure could easily rise to £650bn, more than is being invested in any other city in the world,” says Simon Rawlinson, head of research at the King’s Cross-based analysts.
£650bn is an almost unimaginably huge sum. It is one-third of the entire GDP of Britain, the value of everything we produce in a year. It’s easier to think of it as about £75,000 for every Londoner — £5,000 per head, every year. What will it be spent on? Rawlinson’s research reveals 700,000 new homes, 70m sq ft of new office space and more than 10m sq ft of retail. The biggest single sum, £320bn, will be sunk into infrastructure, mainly Crossrail, the extensions of the Northern and Bakerloo Underground lines, the HS2 high-speed rail line from London to Birmingham and a new third runway at either Gatwick or Heathrow — if that ever happens.
London was founded on the Thames. The Romans used it for trade. It’s the same for today’s empire builders. Most of the big new developments in the capital — also built by foreigners — are close to the river. So, to get a sense of how the £650bn will transform my home town, I decide to go for a walk from Battersea, heading east.
The most obvious change is architectural. The skyline is getting helter-skeltery. I lose count of the half-built hollow-eyed towers that stretch to the horizon before I even reach Lambeth Bridge. Fortunately, Peter Murray knows the number — because he has built them all. There they all are in the giant scale model of central London at the entrance to the offices of New London Architecture, a think-tank in the West End, where he is chairman.
“More than 260 towers more than 20 storeys high are being developed,” he tells me. That’s a four-fold increase on the number already built. I take a close look at Murray’s model. Most of the towers are residential. After centuries of aspiring to a terraced or semi-detached home with a garden, London families are going to have to get used to living in apartments, Manhattan-style.
Londoners have long cherished their city’s distinctly un-Manhattan character, in particular its low-rise skyline. Do all the new towers make the capital more handsome or merely reduce it, as many critics say, to “Dubai on Thames”? I decide to ask Tony Pidgley, the boss of one of London’s biggest home builders, Berkeley Group, when we meet in his latest development next to Tower Bridge. Tall buildings are “like tall, beautiful women,” he declares, flinging his jacket on the floor as he rushes around the marketing suite. “They make a great statement.”
Perhaps. But as I pass the latest block, decorated with slogans that assure me I will “live the life I deserve”, provided I plonk down £1m for a poky studio flat, I have my doubts. To my right, Strata, better known as the “Philishave Tower” in Elephant & Castle is not just ugly, it’s silly. It gets worse when I reach the City. There, the outsized Walkie Talkie expands as it rises to cram in as much floor space as possible and ends up crashing into the skyline like an unwelcome party guest.
John Paul Maytum, an NHS worker whose council flat in Bermondsey looks out over the Walkie Talkie, hates tall buildings, but not because of their architecture. He thinks they have turned his life — his city — upside down. He invites me into his £100-a-week home and points towards the empty apartments at the top of the Shard, where the lights are never on and no one is ever home.
“I don’t mind people living in towers — I live in one — but I do mind people buying a home in a tower as an investment and not using it,” he says. “People who don’t want to live here are investing and driving up prices for people who do. Londoners are being priced out.”
He’s right to say London’s social geography is changing. It’s not just that tall buildings are now for rich people, not poor people, as they were when they first began to be built in the 1950s. The latest figures confirm that rising rents, benefits cuts and a shortage of low-cost homes are driving a growing number of Londoners out of the city. In the year to the end of March, councils moved low-income households out of the capital 1,653 times, up 28% on the previous year. The problem will get worse as councils sell off homes under the government’s revamped right-to-buy initiative, critics say.
Walking across London, the other change you can’t miss is the emergence of vast new residential and commercial neighbourhoods. Battersea Power Station and Nine Elms, which will become a hub of 18,000 new homes, roads and railway stations and the new fortress-like American embassy, is the most obvious. Then there are the 15,000 flats that will soon cover Greenwich Peninsula, south of the O2 arena. Canary Wharf, just across the river, is doubling in size to 30m sq ft, with the development of the adjacent Wood Wharf.
“It’s amazing to think that, only 30 years ago, this was a wasteland where you only went if you wanted to be killed or hire somebody to kill someone for you,” jokes the development’s boss, Sir George Iacobescu, in a nod to the 1980 gangster film The Long Good Friday, which was set in the abandoned Docklands. I meet him on the top floor of One Canada Square — once Britain’s tallest building, but now a relative tiddler.
Further afield, almost 8,000 new homes will transform Earls Court, while King’s Cross, Stratford, Brent Cross, the Royal Albert Dock and Victoria are being almost completely rebuilt as commercial hubs.
Big new developments, for the rich or the poor, can be soulless. But that’s not the way Janice Gray, a hairdresser, sees it. She and her family have lived amid the abandoned car parks and concrete walkways of the Royal Albert Dock ever since the last vessel docked in 1981. She welcomes the £1.7bn redevelopment of the area, led by the Chinese business park entrepreneur Xu Weiping. “People will care about it again, just like they care about Canary Wharf,” she says.
The biggest development in London is the one Londoners cannot see — yet. The £16bn east-west Crossrail, the 26-mile-long tunnel section of which was completed in June, will increase rail transport capacity by 10% when it opens in 2018 and carry 200m passengers a year, three times the population of Britain.
Who will gain from all the capital’s gains? Many who now rent, but are desperate to buy, will find it easier to get on the housing ladder. As many as one-third of the 700,000 new homes that will be constructed between now and 2030 will be owned by councils or by housing associations. A further 20% will be aimed at the middle “affordable” market. But will it be enough to solve the housing crisis? Not, alas, if London’s population continues to grow as forecast. Arcadis calculates that 900,000 new homes — 200,000 more than the 700,000 being built — will be needed by 2030.
Nor are the new homes likely to answer the complaint of Maytum and many others that London is becoming the preserve of the rich, many of whom can’t even be bothered to live in their London homes. Can anything be done to combat what many are calling “social cleansing”?
Yes, says Peter John, Southwark council’s Labour leader and Maytum’s landlord. What’s more, he insists that he and other council leaders are already doing it. They are using “the once in a lifetime opportunity of London’s economic boom” to build new homes. Developers pay councils up to £100m when they negotiate planning consents for big developments, such as the Shard. Councils plough that cash back into social housing. In Southwark, John is building 11,000 new council homes, for which one-quarter of the £3bn cost will come from private developers.
Geographically, it is the east of London that will benefit most from all the pennies from heaven. Ever since the 1980s, when Clerkenwell became fashionable, the capital’s centre of gravity has been shifting ever eastwards. Shoreditch, Hackney, Spitalfields, Whitechapel and Stratford have all become go-to locations, especially for the young. To that list, we can now add Silvertown, Woolwich Arsenal, Greenwich Peninsula, the Royal Albert Dock and Barking on the river, and further away Leyton, Walthamstow and Plaistow. The population of the fastest-growing eastern boroughs is rising by almost 50% year on year.
One question keeps recurring when you look at all the new developments in London. When public expenditure is being slashed as the government tries to reduce the deficit, how come one-third of GDP is being spent in the capital? The answer is, it isn’t our money that’s being spent. We’ve out-sourced the budget. “London enjoys more overseas investment than any other city in Europe and probably the world,” says Professor Tony Travers of the London School of Economics. Qatar, Malaysia, Singapore, China and the US are the biggest investors.
I meet the bosses of some of the developers on my travels. Winnie Chiu, a former banker from Hong Kong, and I chat over a plate of light-as-air prawn dim sum in Shikumen restaurant in the Dorsett, the hotel she recently opened in west London. She is sinking up to £300m into hotels and real estate. In Greenwich, I have tea with the Hong Kong-born Sammy Lee, whose firm, Knight Dragon, is spending £5bn rebuilding the 150-acre Greenwich peninsula. Investment by women such as Chiu and men such as Lee will improve things for many Londoners. But many question whether their cash, and the billions more being sunk into the capital, will make Britain, as a whole, better.
Tom Bloxham is a good man to provide the answer. He is the leading developer in the north of England. His Manchester-based firm, Urban Splash, has spent £1bn building more than 5,000 homes north of Watford. As a “Manc”, you’d think he’d be a professional London-hater. Quite the opposite. “London refreshes the parts of Britain other cities cannot reach,” he tells me over a glass of sauvignon blanc which seems a bit poncey for a man who likes old Victorian warehouses more than people. “The more that is invested in London, the better it does, and, in turn, the better Britain does.”
Travers has the numbers that confirm Bloxham’s analysis. London produces one-quarter of our national income — £350bn of value a year, even though it has only 15% of the workforce. One pound of every five earned in London is spent elsewhere in the country. More than one-quarter of all tax raised in Britain is raised in London and more of it is spent outside the capital than in it.
Can London carry on booming? And even if it does, is it a good thing? Professor Danny Dorling of Oxford University sees trouble ahead. London, he argues, “depends on absurdly over-inflated property and financial services sectors” and is riding for a spectacular fall that will damage Britain as a whole.
“When the skyscrapers were put up with abandon in Manhattan in the late 1920s, just as they are in London now, speculators thought the boom times would last for ever and they would make millions,” he says. “But the market crashed in 1929 and it took 40 years before buildings so high were seen again. Every boom ends.”
Others disagree with equal passion. Back in the marketing suite in One Tower Bridge, Pidgley picks his jacket up off the floor and rushes for the door. We walk and talk a bit. Does he feel like a neo-Victorian, casting the capital anew, I ask. The former Barnardo’s boy who spent some of his childhood living in a disused railway carriage, looks out over a cityscape, much of which he has built, and explodes with laughter. “I’ve been called a lot of f****** things in my life but never that.” He then pauses and thinks. “I’ll tell you one thing, though: if you think the last decade has been exciting, you ain’t seen nothing yet. This city has only just begun.”
THE NORTH: new cities of gold?
Die-hard Manchester United fans still wear the team’s red shirts with the iconic white Sharp logo on the front. “We were quite decent then,” says Andrew Daniels. Sharp hasn’t been United’s main sponsor since 2000 — it’s America’s Chevrolet now — but the Japanese electronics firm is key to Daniels’s future and that of his hometown.
The 32-year-old runs Degree 53, a digital design agency, from an office in what used to be Sharp’s microwave distribution centre for Europe, in Manchester. The abandoned warehouse was recently converted into a 200,000 sq ft tech incubator for hundreds of entrepreneurs, who run start-ups that generate £30m a year. “The kids here show what the northern powerhouse can be,” says Sue Woodward, the Merseyside-born former managing director of ITV Granada, who set up the hub, known as the Sharp Project.
Ah, the northern powerhouse. When the chancellor, George Osborne, unveiled the idea a year ago, most people dismissed it as a pre-election gimmick to grab votes up north. Nick Forbes, the Labour leader of Newcastle City Council, said it “sounds more like a gay club I used to go to in the 1990s” than a bold economic initiative to reverse the seemingly endless drift south of people and money.
But sitting in the sun in his mid-20th-century-modern office near the banks of the Tyne, Forbes is not making fun of the idea any more. “I’m very optimistic about it,” he says. That’s because the first chancellor to represent a northern English constituency since Denis Healey has made the north a priority. “We need a northern powerhouse that can take on the world,” Osborne says.
He has pledged £13bn to upgrade roads and railways, £250m for a new science research centre in Manchester and £78m to build a home for the acclaimed Manchester International Festival of the Arts, to be called The Factory — a homage to Factory Records, the label behind Joy Division, New Order and the Happy Mondays.
Osborne also wants to join forces with the Labour leaders of northern city councils, giving them new powers to attract investment, provided they agree to co-operate with other northern cities rather than compete against them, as so many do now. He’s wooing even odder fellow travellers abroad. The Chinese president, Xi Jinping, visited Manchester last week, for the announcement of a direct air link between Manchester and Beijing. Tax breaks to encourage Chinese firms to invest in the north are also planned.
British governments, red and blue, have tried for decades to address what is politely known as “the regional question” and less politely as the “it’s grim up north” question. Can Osborne, a right-winger who grew up in London and is a member of the Tories’ wildly privileged Notting Hill set, really succeed where so many others have failed?
“He’s got a strong political motive,” just about every Tory — and Labour — MP I meet in the north of England tells me. With Scotland lost to the nationalists and Jeremy Corbyn’s poll ratings under water in the prosperous south, “attacking Labour here could hobble it for good,” says one of the few northern Tory MPs, gleefully.
There’s a strong economic incentive, too. The professional northerner in charge of the powerhouse, the Treasury minister Lord (Jim) O’Neill of Gatley, points out that the world’s stongest economies boast dozens of successful cities, not just one really big one. Germany has eight cities whose economies are as big as, if not bigger than, Berlin’s. By contrast, only one of England’s second-tier cities — Bristol — generates GDP per head above the national average. O’Neill, former chief economist at Goldman Sachs, calculates a resurgent England outside London could generate an additional £80bn over the next 15 years. “If we had done that over the past 15 years, we’d have no deficit now,” he says.
But he and Osborne are battling years of industrial decline and neglect. Take transport — the litter-strewn, two-carriage Northern Rail train that travels the 40 miles from Newcastle to Middlesbrough, to be precise. I board on a sunny afternoon. It’s an hour and a half before I get off. That’s almost as long as it takes to get from London to Paris on the Eurostar, a journey seven times further. “We stop at every lamppost,” the driver tells me. He’s joking. I think.
I fill the time on northern trains — there’s plenty of it — talking to commuters, and it’s not long before I come across another challenge. Strong local identity means Osborne’s dream of getting cities to work with, not against, each other will be tough. David Crow, an accountant, on his way from his office in Newcastle to his home in Edgecliffe, tells me that so little love is lost between Sunderland and Newcastle that “if I were to go into Sunderland in a Toon top [Newcastle’s black-and-white football shirt], I’d be lynched”. He’s not joking. I think.
Deprivation is entrenched in the north. London may be the most socially divided city in the country, but there are more people living in poverty in the north than in the capital, and more who have been living in poverty for longer. More than one in five households in the northwest, and two in five children in Greater Manchester, live in poverty, according to the Institute for Public Policy Research.
In Toxteth, Liverpool, one of the most run-down areas in the north, I can buy an abandoned council house for £1. All I have to do is agree to spend about £35,000 doing it up and live in it for five years. Carol has lived in the area all her life in one of the nicer council houses. Over tea in the Local Solutions support centre, she tells me: “Osborne has no idea how powerless poverty makes people feel.” Her ash-grey skin creases like cigarette paper as she frowns. “There are food banks,” she says. “When I was growing up, there was food and there were jobs. There’s not even shop work any more. Some days, it’s so bad I feel like jumping off the roof.”
Osborne faces political problems, too. Some Labour council leaders want to grab the new powers he’s dangling to attract new investment. Manchester, in particular, has pioneered partnerships with other northern cities and private-sector firms to develop everything from the Manchester Ship Canal to the city’s Hotel Football, backed by former United stars including Ryan Giggs and Gary Neville. Struggling to make himself heard over the clang-clatter of the tea trolley down the vast, gothic hallways outside his office, Sir Richard Leese, leader of the city council, praises Osborne as “a rarity, very astute”.
Tony Blair’s former policy chief, Lord Adonis, agrees. He has just resigned the Labour whip to join Osborne’s northern crusade. That infuriates many senior Labour party figures in Westminster. They oppose the chancellor’s plan to devolve more power to local councils, fearing it is a cynical move to try to spread the blame for deep public-spending cuts. “Beware Tories bearing gifts,” says Andy Burnham, the shadow home secretary, who was born in Liverpool and represents Leigh in Greater Manchester.
Osborne relishes a challenge. He imposed austerity on voters — and his party got voted back in with an overall majority. One year on, is his powerhouse powering ahead? Not so much. In fact, it got off to what even Lord O’Neill admits was “a cock-up”. Ministers “paused” the planned electrification of the TransPennine rail line, which aims to reduce the journey time from Manchester to York by 15 minutes. The work has now been unpaused, but critics point out that it will not be finished until 2022. HS3, a 125mph rail line linking the biggest cities in the north of England from east to west, won’t arrive any time soon.
Economists have scant praise for the chancellor’s efforts to rebalance the economy. The latest figures confirm that London is far wealthier than it was before the global financial crisis, as the City has recovered and house prices have soared, but the north is struggling to get back to where it was before the crash. Things are getting dramatically worse, not better, on Teesside and in Scunthorpe, where thousands of steel workers’ jobs are being axed.
Private Eye now jokes that the government is downgrading the northern powerhouse plan “to the northern shithouse initiative”. Burnham enjoys the metaphor. “Northern powerhouse? My arse,” he says.
It’s gloomy stuff. So, why, as he walks along the banks of the Tyne, past the new bridges and art galleries, is Newcastle Council’s Nick Forbes so upbeat? He insists a new entrepreneurial spirit is beginning to spread across the north. “Since the 1980s, we’ve felt like we were having the shit kicked out of us, day after day,” he tells me. “But the mind of this region is changing. Business is growing. We’re recovering our confidence.”
Source: IPPR NorthCould he be right? Could business, which powered the industrial revolution and made the north what it is, spark a new renaissance? It certainly looks that way half an hour down the road in Sunderland. There, I meet Colin Lawther. He manages more than 7,000 workers, who will this year turn out 500,000 Nissan cars, more than are screwed together in all the car factories in Italy.
“We used to have coal, shipbuilding and steel. Now we have the most efficient car plant, not just in Britain, but in the whole of Europe,” he says, as he yanks on his grey shop-floor bomber jacket. “We’re creating the hi-tech manufacturing economy that Britain needs.”
Where Nissan leads, other Japanese manufacturers are following. Hitachi will soon start making trains down the road in Newton Aycliffe, Co Durham, in a new £82m factory that will employ around 730 people. “We’ve brought train design and manufacturing back home to its birthplace,” Hitachi’s chief executive, Hiroaki Nakanishi, tells me — Stephenson’s Rocket was built just up the road in Newcastle.
Supporting all the new overseas and UK investors across the north of England are the resurgent financial services, legal and insurance firms, many of which are based in Leeds. Legal & General has just announced that it is investing £160m in almost 1m sq ft of new office space and 7,000 new homes on the outskirts of the city.
Across the Pennines, it’s not just the Sharp Project that is helping to transform Manchester. Salford Quays — once a wasteland where Degree 53’s Daniels used to fish “when I wasn’t fending off muggers” — is now the biggest media and digital hub in Europe outside London.
After much of BBC news, sport and children’s TV and radio services moved there four years ago, hundreds of independent media and tech firms have followed, including much of ITV, which has rebuilt its Coronation Street set there. MediaCityUK, as the district is now known, will stimulate £7.6bn of increased economic output by 2030, according to New Economy, the Manchester- based economic analysts.
It’s a far cry from the local culture that the former Oasis guitarist and songwriter Noel Gallagher remembers when he was growing up in Manchester in the 1970s. “We had Granada Studios and George Best, and that was it,” he said recently.
Thirty-five miles down the road, Liverpool is even daring to rediscover the maritime edge that once made it one of the wealthiest cities on the planet. The world’s largest container ships will soon start docking at Peel Ports Group’s new £300m deep-water terminal.
Anyone from the Midlands reading these pages will have a nagging question: where does the nascent northern powerhouse and London’s £650bn resurgence leave Birmingham — still (officially, at least) Britain’s second city? Is it, as Daniels jokes, “just a big roundabout” between north and south — a thin circle of meat in the national sandwich?
“Yes, we are,” says Mark Rogers, chief executive of Birmingham City Council, whose office is a sandwich throw away from the spiffy new £750m New Street station, before swiftly adding, “and we’re also the bread on top and the bread on the bottom.”
Fast rail connections with London, which will get faster when the £50bn HS2 high-speed rail line is completed, mean the West Midlands will benefit from the southeast’s white-hot economy. At the same time, Birmingham will profit from the northern powerhouse, especially when HS2 extends to Manchester and Leeds. “We’ll prostitute ourselves in every direction to create the Midlands engine,” says Rogers.
So, that’s England sorted, then. Thanks to its record new investment, London will remain the gleaming city on the hill/death star* (*delete according to your housing equity).
The capital’s influence and power will grow so much, its northern border will extend past Cambridge and Milton Keynes to reach Birmingham. To the west, it will reach Bristol, to the south, Portsmouth, and to the east, Norwich. There’s no stopping it, but it is surely a good idea to try to make Britain’s once-great second cities great again. And, thanks to a mix of public, private and Chinese cash, a new entrepreneurialism, and an alliance between forward-looking Labour councils and Osborne, there’s the best chance in years that it might just happen. It certainly will, if the spirit of Liverpool is anything to go by. While researching this article, I asked everyone I interviewed in the north what they thought was Britain’s second city. Everyone named their own northern home town, except Carol in Liverpool. She named London.